On November 25, 2013, Governor Tom Corbett signed Act 89 (the “Act”) into law.  The Act, predominantly funded by an increase in motor fuel taxes, will provide needed upgrades to Pennsylvania’s transportation infrastructure.

Funding the Act:  The Act abolishes the Liquid Fuels and Fuels tax but increases the statutorily fixed average wholesale price on which the Oil Company Franchise tax rate is based.  The net effect is a tax increase, starting January 1, 2014, of 9.5 cents per gallon on gasoline and undyed diesel.  The new Pennsylvania tax will be 40.7 and 51 cents per gallon on gasoline and diesel respectively.  The Pennsylvania USTIF (Underground Storage Tank Indemnification Fund) fee remains at 1.1 cent per gallon on gasoline and the federal tax rate remains at 18.4 and 24.4 cents per gallon on gasoline and diesel respectively.  Starting January 1st Pennsylvanians will pay in total motor fuel taxes, 60.2 cents for every gallon of gasoline and 69 cents for every gallon of undyed diesel.  This puts Pennsylvania in the top five states for highest motor fuel taxes in the U.S.

Future Increases:  Unfortunately for the motoring public, additional motor fuel tax increases are built into the Act for 2015.  Also coming in 2015 are increases to driver license and registration fees.

Spending the Tax:  The motor fuel tax increase will generate $2.3 billion per year which will allow a 40% increase in transportation spending.  Pennsylvania plans to use the tax increase to upgrade thousands of bridges and roadways across the state.  These upgrades are overdue as 4500 out of the 25,000 state owned bridges are currently structurally deficient. The funds will also be used to subsidize public transportation services.  Although not thoroughly detailed as of yet, the tax revenue will also be used to set up multi-modal grants which will benefit all forms of transportation from railroads to pedestrian pathways.

Calculating the Tax:  The process for determining the gallons that are subject to this tax remains the same as is currently in place.  Each distributor will need to provide a starting book inventory and account for all gallons sold after midnight on December 31, 2013 on a monthly basis.  Each monthly report, along with receipts and disbursement summaries and appropriate schedules, must be mailed along with remittances on or before the 20th day of each month to the PA Department of Revenue.  If a distributor has questions or is interested in electronic submissions of the monthly report, information can be found on the PA Department of Revenue Motor Fuels Division website at http://www.portal.state.pa.us/portal/server.pt/community/liquid_fuels___fuels_tax/14434.